A common misconception is that planning is an annual event. Budgeting: setting targets and allocating expenses; true, but what happens next? As life goes on, rates fluctuate, new opportunities for growth appear, and your ever-changing customer expectations must be managed. Your budget, as it was initially locked in, must die and be reborn accordingly.
There are several ways to get a better handle on your financial future and get your plan back on track to meet your goals.
For many, the art of planning feels counterintuitive, as its core is not accounting-based as much as it’s a sociological experiment. We use a planning model to simulate the environment and measure the ramifications of change on the balance sheet. However, the real test is anticipating the resulting business hinging upon your customers’ changing needs.
You hear over and over again that the one thing you can always count on is change. Change is what you hope for as a financial intuition. It’s what drives business and profits. Rate change, as we all know, can be one of the most volatile components of your business, and at the same time, the very heart of banking itself.
It was only two months ago we released a blog discussing the critical role that liquidity management will play in 2023. Fast forward to now, and two financial institutions have been closed due to, at least in part, funding imbalances – the first banks in three years to fail. Although liquidity and interest rate risk often take a backseat under stable economic conditions, times like these require you to take an in-depth look into your asset liability management program to ensure you have a plan to both meet funding needs and stay in compliance with regulatory expectations.
With the increasing number of financial planning software options available, it can be difficult to determine which one is the right fit for your organization. That's why it's essential to consider several key factors before making a decision. In this blog, we'll examine how Plansmith's planning suite stands out from the competition and why it could be the perfect choice for your financial institution.
What do a massive uptick in deposits, a possible impending recession, and a tremendous hike in interest rates have in common? Absolute potential for wreaking havoc on your institution’s liquidity position. One unplanned or mismanaged situation could mean falling out of policy limits, or worse.
Join us as we welcome our newest Planning Advisor, Peter How! At Plansmith, we’re excited to have such an experienced community banking veteran on staff. Read on to learn about Peter’s career and how his background will add value to our clients’ planning experience.
Easily, the hottest regulatory topic of the past seven years is CECL. On top of the long-term lead up, the regulations and deadlines have changed so many times that many institutions hoped the requirement would disappear altogether. However, as of January 1, 2023, CECL is a reality. So, how confident are you in the solution and CECL reporting tools your bank or credit union have decided to implement?
Establishing and maintaining a sound interest rate risk (IRR) program is crucial to ensure proper balance sheet structure and comply with Regulatory expectations. During my 20+ years as a senior FDIC examiner, I routinely saw organizations experiencing issues with their ALM/IRR practices, ranging from loose misunderstandings of the guidance to critical errors that put the health of the organization at risk. Unfortunately, in my current advisory role, I see the same issues all too often.
About two years ago, I wrote a blog declaring the end to, or “the death of,” Surge Deposits. In that post, I had noted how at the time of, and following the 2007-2009 Great Recession, the banking industry saw a substantial influx of deposits as real estate and equity investors liquidated positions and sought safe places to store their money and ride out the storm. I further noted that as CD rates plummeted during, and following, the economic crisis, CD holders weren’t being provided with any incentive to have their money “locked” into time deposits. As time deposits matured, CD holders routinely moved their balances into more liquid non-maturity deposits (NMDs). These former CD holders were essentially temporarily “parking” their money in NMD accounts, just waiting for CD rates to return to what they believed were more “normal” levels, at which time they’d move the balances back into time deposits.
Are you really planning, or are you just budgeting?
By this I mean, are you filling out the numbers on a spreadsheet or planning the actions needed to make it a reality?
It’s always gratifying when all the numbers come together in a neat package showing expected growth and earnings for next year. And, there were likely many contributors who verbally expressed their goals and plans on how they are going to reach them. The compiled financial targets are then presented to and accepted by the board, and your monthly comparisons begin. Budget “predictions” are compared to reality. Variances from “budget” are explained, and business continues as usual. In essence, that’s budgeting.